Friday, July 26, 2024

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Costco Wholesale Corporation (COST), Danaher Corporation (DHR) and ServiceNow, Inc. (NOW), as well as two micro-cap stocks AMREP Corporation (AXR) and Autoscope Technologies Corporation (AATC). The Zacks microcap research is unique as our research content on these small and under-the-radar companies is the only research of its type in the country.

These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

Costco’s shares have outperformed the Zacks Retail – Discount Stores industry over the year-to-date period (+23.6% vs. +14.2%). The company being a consumer defensive stock, has been surviving the market turmoil pretty well. The discount retailer’s key strengths are strategic investments, a customer-centric approach, merchandise initiatives, and an emphasis on membership growth.

These factors have been helping it register decent sales and earnings numbers. This outlook reflects Costco’s ability to navigate the challenging operating environment, generate solid sales, and register high membership renewal rates.

A favorable product mix, steady store traffic, pricing power, and strong liquidity position should help Costco keep outperforming. While trading at a premium to its peers, its long-term growth prospects should help the stock see a solid upside.

(You can read the full research report on Costco here >>>)

Shares of Danaher have outperformed the Zacks Diversified Operations industry over the year-to-date period (+16.7% vs. -4.9%). The company is witnessing stable demand in the clinical and molecular diagnostics businesses which is supporting its Life Sciences segment. The segment has been witnessing positive responses toward its new products.

Danaher’s commitment to return value to shareholders is encouraging. Synergies from the Abcam acquisition bolster its growth. Through Danaher’s DBS initiatives, it has been able to reduce the impact of supply-chain constraints and inflationary pressures.

However, the company is plagued by weakness in the Life Sciences and Biotechnology units due to decreased demand across major end markets. An increase in SG&A expenses may affect the margin performance. High debt levels may raise its financial obligations and drain its profitability. Given the company’s international exposure, forex woes are weighing on its top line.

(You can read the full research report on Danaher here >>>)

ServiceNow’s shares have outperformed the Zacks Computers - IT Services industry over the year-to-date period (+17.4% vs. +4.2%). The company has been benefiting from the rising adoption of its workflows by enterprises undergoing digital transformation.

ServiceNow had 1,988 total customers with more than $1 million in annual contract value (ACV) at the end of second quarter, which represents 15% year-over-year growth in customers. ServiceNow had 14 deals greater than $5 million in net new ACV and four deals of more than $10 million. It closed 88 deals greater than $1 million net new ACV.

Generative AI deals continued to gain traction with net new ACV for Now Assist and was part of 11 deals worth more than $1 million in the reported quarter. It is riding on an expanding partner base. Nevertheless, ServiceNow is suffering from persistent inflation, stiff competition, and a challenging macroeconomic environment.

(You can read the full research report on ServiceNow here >>>)

Shares of AMREP have outperformed the Zacks Real Estate - Development industry over the past year (+27.4% vs. -6.6%). This microcap company -- with market capitalization of $115 million -- has a land portfolio in high-growth Rio Rancho, NM, covering 17,000 acres, positioning it to benefit from rising demand. In fiscal 2024, revenues grew 6%, driven by diverse streams.

The homebuilding segment grew with 36 homes sold and 64 in production in fiscal 2024. AMREP had $30.2 million in liquidity and minimal debt, supporting new projects. Property sales and adaptive strategies to market conditions enhance their portfolio management. Despite increased costs and inflation pressures, AMREP’s effective cost management and sustainable development practices maintain profitability.

Yet, challenges like declining net income, high dependency on a few homebuilders, real estate market cyclicality, regulatory risks and high competition persist. Slower land and home sales, liquidity constraints and interest rate sensitivity also pose risks.

(You can read the full research report on AMREP here >>>)

Autoscope Technologies’ shares have outperformed the Zacks Technology Services industry over the past year (+48.8% vs. +38.3%). This microcap company with market capitalization of $36.71 million benefits from strong demand for its Autoscope Vision product, driven by North American infrastructure funding, evidenced by a 4% year-over-year increase in the first quarter of 2024 royalty revenues.

A high gross margin (96% overall, 97% for royalties) supports profitability. Shareholder returns are strong, with consistent dividends and a special $1.32-per-share payout. Strategic restructuring, including the sale of the RTMS radar line, has improved operational efficiency. Innovation continues with Autoscope IntelliSight's launch in Europe.

However, heavy reliance on Econolite royalties, reduced cash reserves, declining product sales and intensifying competition present significant risks. The company’s success depends on navigating these challenges while leveraging government funding and maintaining technological leadership.

(You can read the full research report on Autoscope here >>>)

Other noteworthy reports we are featuring today include IBM Corp. (IBM), PayPal Holdings, Inc. (PYPL) and Nasdaq, Inc. (NDAQ).

Mark Vickery
Senior Editor

Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>